The Ultimate Guide to Why Investment Banking?

Investment banking is one of the finance industry's most profitable segments. In 2018, the US alone saw $39 billion in revenue from investment banking. If you think the term "investment banking" sounds strange, you're not alone.

Said another way, even financial specialists are baffled by the intricacy of this high-stakes sector. Having said that, it makes sense that a great deal of people want to become the next Wolf of Wall Street, considering that the starting salary is $1,40,000 annually. Some folks are merely curious about the workings of this glitzy industry.

Regretfully, it's not champagne, nightclubs, or boats. The work itself is extremely stressful, and some investment bankers put in more than 100 hours a week at their jobs. What precisely is investment banking, then? Why does it make so much money? In what ways does it vary from a commercial bank?

Before we explain how an investment bank works, let's take a moment to learn how it all began. In the United States, commercial banks started performing the functions that we now identify with investment banks in the early 19th century. But then, during the Civil War, everything was different.

The Question of "Why Investment Banking?" Query for an Interview

In an investment banking interview, this is a question that you will almost certainly be asked. Why investment banking out of all the careers you may have after college graduation?

The secret is to show that you're intelligent, that you know what the job requires, and that even with this clear understanding of the requirements, you still truly want to do it!

The essential thing is to show that you're intelligent, that you know what the job requires, and that even with all of that knowledge, you still truly want to do it!

1. Able to work well under pressure; 

2. Able to put in long hours; 

3. Unwilling to give up.

This article will teach you how to succinctly exhibit the three attributes.

Motives that are Constructive for Pursuing an Investment Banking Career

1. Financial Modeling and Valuation Work

In investment banking, you can have the chance to develop vast, intricate financial model-building skills early in your career. Bankers don't always make outstanding investors, but they do spend a lot of time doing valuation work, which is a terrific place to start your career.

2. Exposure to High-Profile Deals

The majority of the work that bankers do is classified as top secret until it is eventually made public, at which point it is typically featured on the business section's front page. Saying something along these lines will probably boost the interviewer's ego and convey a strong motivation for entering the field.

3. A Formidable Obstacle and a Steep Learning Curve

Making the admission that IB demands incredibly long hours and that you are driven by the task will go a long way toward making you a desirable candidate for the position. Making comparisons to your own life—for example, competing as a professional musician, athlete, or in an exceptionally difficult event (like climbing Mount Everest)—can be beneficial.

Negative Motivations for Pursuing IB

1. Pursuing it for Financial Gain

It is not a good idea to claim that your motivation stems from the amount of money bankers make, even though that is probably a major motivator for you.  Though that might be accurate, don't say it because most people find it offensive.

2. Using it as a Springboard for Another Endeavor

This might also be the case, but you shouldn't mention anything about your ultimate goal of entering the hedge fund or private equity space and how IB is a wonderful way to get there. An employer hopes that you will remain with them after you are hired.

How Can I Become an Investment Banker? What Do I Need?

Typically, you'll require an internship at a reputed company and a business administration degree from college to become an investment banker. To progress in your profession after being hired, you will need to obtain further certifications, such as a master's degree in business administration.

The Life of an Investment Banker

The desire to live the lifestyle of an investment banker is a major motivator for recent college graduates wishing to work in this field. The pay in investment banking is well-known for being far greater than that of any other industry for experts operating at a comparable level. 

The glitz and glamor of the job, together with the exclusive events and welcoming atmosphere of the island, draw people to pursue careers in this industry.

The Current Situation

Investment bankers have privileged access to people and information since they typically work with high-net-worth clients, including celebrities and entrepreneurs, and are involved in high-profile transactions. The people in our immediate social circle treat the designation of an investment banker with great respect. Being able to showcase a unique quality that only a small portion of people possess helps you stand out from the crowd.

Enthusiastic

Many in this field are purely motivated by passion. They enjoy crunching numbers, examining market indices, and stock analysis. From an early age, they typically wish to work in the finance industry. Furthermore, they excel in their position, which translates into a comparatively better salary.

Conclusion

One of the most prestigious job options in the banking and finance sector is investment banking. The title of investment banker has its allure and is regarded as one of the most fulfilling in the business. Why then is it so well-liked by those who wish to work in finance?

To be honest, the majority of people are drawn in by the large checks that investment bankers write. Some people are motivated by the investment banker lifestyle, while others are just passionate about working in the financial services sector. 

While there are many reasons for people to work in investment banking, most of them are motivated by the prospect of earning large sums of money. It's one of the few jobs where a six-figure salary may be attained with just a basic degree in economics, statistics, maths, etc.